Legislature Nursing the Louisiana Elderly Slush Fund Drain

The Gov. Bobby Jindal Administration with its health care budget has made it put up or shut up time for the Legislature in regards to a number of controversial funding decisions it made in the past that favor nursing homes at taxpayer expense.

That comes in the form of a portion of the payments going to nursing homes for Medicaid patients coming from the Medicaid Trust Fund for the Elderly. The Fund was created with federal government money to provide a vehicle to prop up reimbursement rates, and since has received continued matching revenues from it as well as from investment activities, fines paid by these providers, and specialty license plate sales.

This creation occurred at the height of nursing home influence in the Legislature, in an era that allowed nursing homes in the state to ring up among the states some of the highest proportion of their revenues from Medicaid while delivering among the highest costs per bed, which continues to this day. This inefficiency grew worse with the implementation of a program to pay them tens of millions of dollars for thousands of empty beds while the crowning blow to taxpayers came when the case mix methodology allowing this overgenerous state of affairs became enshrined in state law in 2006.

All the while, judicial imperatives argued for defunding nursing home expansion and service provision. As a result of court settlements, Louisiana (and all states) must provide services to the developmentally disabled, including those suffering from age-related impairments, in the least restrictive setting; typically, home- and community-based care. Previously, the state had been notorious for a strategy of warehousing the disabled into nursing homes and had set the gravy train rolling for these institutions. But as then state was making nascent efforts to accomplish this mandate through its waiver program services, the nursing home industry scrambled through its legislative allies to lock in as much of its preferential treatment as possible.

Upon its assumption of power, the Jindal Administration took a more critical view of this financing model, but not enough to cause any real rollback, hoping instead that if it could begin the process of managing the glut of nursing home beds for state Medicaid payment purposes so that in several years demographics could catch up, both in terms of raw numbers now lower than once projected because of increased diversion into waiver services and in that the case mix would include a higher proportion of private insurance payees. In part, this led to the strategy of carrying the glut by draining the Fund.

Which the law clearly allows it to do, despite the caterwauling of the nursing home industry that wanted to have a fat reserve held indefinitely to increase the chances subsidization would continue as long as possible. What particularly galls it on this account is that in 2012 the industry muscled through a constitutional amendment to prohibit “funds sweeps” out of it, a strategy used in budgeting to take predictable flows of money coming into a dedicated fund with surpluses unlikely ever to be spent on that dedicated purpose on the basis of genuine need and to redirect them to higher priority spending needs, in the hopes of trying to keep the balance up, but budgetary strategy kept draining it anyway.

In part, as a result of this tactic (although depleting it as well is the ultimately correct presumption of a Pres. Barack Obama Administration and Democrat-run Congress that would and did cause continued economic mismanagement that has resulted in the weak-to-nonexistent economic recovery which produced a negative return on Fund assets) nursing home interests pushed through the Legislature last year a proposed constitutional amendment that could take effect in fiscal year 2016 constitutionally rather than statutorily to lock in, and with an automatic escalator, the reimbursement rate for them and others, intentionally leaving out their “competitors,” waiver service providers. If it passes this fall, this means either the one growing area of service provision – waivers, over which legal mandates apply and are driving – the reimbursement rates of which have been cut the most in recent years will become the only real area in which cuts ever can be made. This sets up the state for a budgeting nightmare that likely only tax increases – literally letting nursing homes pick the pockets of taxpayers – can resolve.

Whether by design to head this off (it claims it is looking at other funding sources courtesy of a law enacted last year that does not limit its intake to the legal sources or federal funds), the Jindal Administration budgeting choice here of taking $233 million from the Fund, forecast to leave this almost empty, encourages the Legislature to revisit its overwhelming approval of the amendment. In doing so, if the Legislature were to reject that pot of money (even as it authorized drawing $183 million for this fiscal year), it would have find replacement bucks, putting at risk the much-trumpeted increases that some parts of state government would receive under the proposed FY 2015 budget.

Unless legislators have the guts to take on the resulting enmity, this reshuffle would spawn from the likes of educators and state employees (which history suggests otherwise) by using this money in FY 2015 and if the amendment passes, this sets up a tremendous funding crisis during the election year FY 2016 coming next. And thus this may be incentive for legislators to rescind approval of the amendment going to voters, or for voters if educated on the matter to respond with amendment rejection to avoid this ticking time bomb.

So if this is the unspoken gambit of the Jindal Administration designed to torpedo a bad constitutional change, it couldn’t have played this any better by making legislators a funding offer they’ll find difficult to refuse. Even if it isn’t the intent, the happy side-effect wrought will encourage doing the same. Thus, taxpayers should be glad a fund created to keep the gravy train rolling for a special interest will get emptied, and, if legislators don’t act, then will have every reason and chance in the world not to permit even further privileging this special interest at their own expenses.